This Information Paper outlines changes to be made to the publication Wage Cost Index, Australia (cat. no. 6345.0) which will be released under the new title, Labour Price Index, Australia from the September quarter 2004 edition onwards. The new name identifies the publication as one of the price indexes produced by the ABS and also reflects the inclusion of non-wage and labour price indexes. The content and ordering of all tables previously published in cat. no. 6345.0 will not change.

The paper provides a brief description of the new indexes to be included in the publication and a 'mock-up' of the September quarter 2004 edition to be released on 17 November 2004.

INQUIRIES

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or Tim Landrigan on Perth (08) 9360 5151.

CHANGES TO PUBLICATION 6345.0

NEW REFERENCE BASE

The reference base of an index series is that period for which the value of the index is set to 100.0. For the quarterly wage price indexes (previously known as the wage cost indexes), the September quarter 1997 was used as the original reference base, as it was the first quarter for which data was available. With the introduction of the non-wage price indexes, all index numbers will be presented on a reference base of 2003-04.

Details about the re-referencing process, including the effect on the existing index numbers and how to convert the quarterly series back to the previous reference base, can be found in Appendix 2 of the 'mock-up' of the September quarter 2004 publication.

A consequence of re-referencing price indexes can be that the period to period percentage changes calculated using re-referenced index numbers may differ slightly from those calculated using the original series. These differences do not constitute a revision of the index but simply reflect the effect of rounding.

NON-WAGE PRICE INDEXES

The ABS has produced quarterly wage price indexes (Wage Cost Index, Australia cat. no. 6345.0), since September 1997. Non-wage price indexes and labour price indexes will be published for the first time in November 2004. These indexes will be available on an annual basis.

The non-wage price indexes will include annual and public holiday leave, employer funded superannuation, payroll tax, and workers' compensation. Like the wage price indexes, the non-wage price indexes are Laspeyres-type price indexes, which measure changes in the price of labour using fixed weights. The price changes recorded are unaffected by changes in the quality and quantity of the work performed.

Annual and Public Holiday Leave Index

As is the case for the wage price indexes, the Annual and public holiday leave index (and the Superannuation index discussed below) are calculated using data collected from a sample of individual jobs common to consecutive time periods.

The annual and public holiday leave price is derived using both wage data (in the form of an hourly rate of pay) and the amount of annual and public holiday leave that is offered by the employer. The index is then constructed by comparing this price to that in the previous year. Changes in the price will result from changes in the hourly rate of pay, and/or the amount of leave offered by the employer.

Superannuation Index

The superannuation price is derived using both wage data (again in the form of an hourly rate of pay) and the rate of superannuation that is paid by the employer. Changes in the price from one year to the next will result from changes in the hourly rate of pay, and/or the rate of superannuation paid by the employer.

Payroll Tax Index

The methodology used to calculate the payroll tax index (and the workers' compensation index discussed below) differs from that used for annual and public holiday leave and superannuation. As payroll tax and workers' compensation are both levied at the employer level, the price is also determined at this level. Therefore, rather than calculating the indexes from a sample of individual jobs, the Payroll tax and Workers' compensation indexes are calculated using an employer's total payroll.

Utilising data from both ABS and non-ABS sources, the payroll tax price is modelled by applying the appropriate payroll tax variables (rate and threshold) to employers' payroll data. Changes in the price from one period to the next will result from changes in the payroll tax variables, and/or the employer's payroll (excluding payroll changes resulting from quantity and quality shifts such as changes in the number and experience of the staff employed).

Workers' Compensation Index

The workers' compensation price is modelled by applying the appropriate workers' compensation premium rate to employers' payroll data. Where applicable, the price of excesses payable and excess buy-out options are also modelled. Changes in the price from one year to the next will result from changes in the range of workers' compensation variables, and/or the employer's payroll (again, excluding payroll changes resulting from quantity and quality shifts).

Labour Price Index

A labour price index can be constructed by combining the individual wage and non-wage components. Two versions of the labour price index will be produced, one excluding bonuses and the other including them. As is the case for the wage price indexes, only the labour price index that excludes bonuses is considered to be a pure price index as bonus payments often reflect changes in the quality of work performed.

DATA AVAILABILITY

Eleven additional tables will be included in the September quarter 2004 publication, presenting non-wage and labour price indexes. These will include state/territory, sector and industry information. The layout of each of the new tables is shown in the 'mock-up' of the publication included at the end of this information paper.

The new indexes will all be financial year indexes. They will be published annually in November, as part of the September quarter LPI publication. In November 2004, data for three financial years will be released; 2001-02, 2002-03 and 2003-04. The wage price indexes will continue to be published quarterly as in the past.

Indexes will be available for various combinations of state/territory, sector and industry classifications. Unlike the wage price indexes, no occupation data will be available for the non-wage or labour price indexes.

FURTHER INFORMATION

The first Labour Price Index, Concepts, Sources and Methods publication (6351.0.55.001) will be available on the ABS website from 17 November 2004. It will provide comprehensive information about the concepts underlying the labour price index, as well as the data sources and methods used to compile all of the wage and non-wage price indexes.

If you have any questions regarding these changes, please contact Tim Landrigan on (08) 9360 5151 or by using the email address tim.landrigan@abs.gov.au.